The causes of US government debt

There's an interesting piece in Today's Washington Post. The report contains a graph produced by the Center on Budget and Policy Priorities that does something very simple. It takes US public debt since 2001 — which is the last year that the budget saw surpluses — and breaks it into its component parts. The graph plots the numbers as a percentage of GDP. Here is the figure.

It shows that half the projected public debt can be directly attributed to Bush-Era Tax Cuts and the cost of the wars in Iraq and Afghanistan. A fair propostion is the result of the economic downturn and the cost of various bailouts. Obama's recovery measures (light blue) are having a relatively modest effect.

What intrigued me in particular was the grey bit - "Other Debt". I wonder what is in there?

Well, in one of my earlier blogs, I looked at the US Treasury figures for the cost of interest payments on US Government Debt. Specifically, you can find numbers for the Interest Expense on the Debt Outstanding which includes the monthly interest for:

• U.S. Treasury notes and bonds
• Foreign and domestic series certificates of indebtedness, notes and bonds
• Savings bonds
• Government Account Series (GAS)
• State and Local Government series (SLGs) and other special purpose securities.

The total in interest payments in 2011 was $454,393,280,417.03. The USA's GDP in 2011 was $15.09 trillion, which means that 3% of the total is simply interest charges.

It goes without saying that if that 3% was removed from the bill by allowing the US Treasury to create the US Dollar money supply directly, instead of borrowing money from a consortium of private banks (i.e. the Federal Reserve), then things would rapidly get a lot better.

It would also help a lot if the super rich Americans who finance the Republican party actually paid the same level of tax that they paid pre-Bush, and if the US didn't plough so much money into fighting wars. But that's another story.